Groupon SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

SWOT analysis is a strategic planning tool that can be used by Groupon managers to do a situational analysis of the company . It is a handy technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Groupon is facing in its current business environment.

The Groupon is one of the leading organizatations in its industry. Groupon maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Groupon to develop four types of strategies:

SO (strengths-opportunities) Strategies

WO (weaknesses-opportunities) Strategies

ST (strengths-threats) Strategies

WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect Groupon strengths, and eradicate its weaknesses.

Step by Step Guide to Groupon SWOT Analysis

Strengths of Groupon – Internal Strategic Factors

As one of the leading firms in its industry, Groupon has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Groupon are –

Highly skilled workforce through successful training and learning programs. Groupon is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.

Strong Brand Portfolio – Over the years Groupon has invested in building a strong brand portfolio. The SWOT analysis of Groupon just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.

Good Returns on Capital Expenditure – Groupon is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.

Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.

Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.

Highly successful at Go To Market strategies for its products.

Automation of activities brought consistency of quality to Groupon products and has enabled the company to scale up and scale down based on the demand conditions in the market.

Strong distribution network – Over the years Groupon has built a reliable distribution network that can reach majority of its potential market.

Weakness of Groupon – Internal Strategic Factors

Weakness are the areas where Groupon can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Groupon needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.

The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.

Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.

Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Groupon

Not highly successful at integrating firms with different work culture. As mentioned earlier even though Groupon is successful at integrating small companies it has its share of failure to merge firms that have different work culture.

High attrition rate in work force – compare to other organizations in the industry Groupon has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.

Investment in Research and Development is below the fastest growing players in the industry. Even though Groupon is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.

Opportunities for Groupon – External Strategic Factors

Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Groupon’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.

Government green drive also opens an opportunity for procurement of Groupon products by the state as well as federal government contractors.

The market development will lead to dilution of competitor’s advantage and enable Groupon to increase its competitiveness compare to the other competitors.

Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Groupon to capture new customers and increase its market share.

Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Groupon an opportunity to enter a new emerging market.

Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.

The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Groupon to increase its profitability.

The new technology provides an opportunity to Groupon to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.

Threats Groupon Facing - External Strategic Factors

Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.

New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .

Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Groupon in those markets.

Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Groupon

New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.

The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.

Liability laws in different countries are different and Groupon may be exposed to various liability claims given change in policies in those markets.

Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.

Limitations of SWOT Analysis for Groupon

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the
major limitations of SWOT analysis
. For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.

SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.

The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Groupon

SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.

SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Groupon

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Groupon managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Groupon

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.